VEDANT INSIGHTS

INDIA, also known as the ‘land of diversity’ is now progressing towards becoming the next ‘world’s factory’ after its neighboring country China. This is because of the various factors and upcoming opportunities. But does India have the potential to be world’s manufacturing hub? Let’s review it.

India is one of the fastest developing nations in the world. According to the World GDP Ranking 2023 list, India is the fifth largest economy in the world. India has the potential to turn the status quo into an opportunity and call the coming century as ‘The Indian Century’.

But why India and no other countries?

China which is the present ‘world’s factory’ is facing various problems such as geopolitical tensions, population decline, and high labor wages. The new policies set by the Chinese government are pushing the companies to diversify and outsource the supply chains.

Japan, one of the most advanced countries in the world in terms of manufacturing and technology is also facing problems like an aging population, offshoring, and a sagging currency.

The economies of other countries sharing border with India such as Pakistan, Sri Lanka, and Bangladesh are faltering. Because of the pandemic COVID-19 and the ongoing Russia-Ukraine war, the economies of these countries are facing soaring debt and high inflation. Due to this, both India and China, the critical trade partners have the chance to increase their leverage.

Can India really progress toward becoming the next world’s factory?

The answer is yes. There are various factors such as:

1. The median age of the population of India is 28

Recently, India had or will soon surpass China in terms of population, both having a population of about 1.42 billion. But for the first time in the year 2022, China marked the first drop in the total population in six decades. This can be alarming for China.

People under the age of 25 account for more than 40% of India’s population. Today India’s median age is 28 which is quite low compared to other developed countries such as USA and China having median ages of 38 and 39.

This data shows that India has high number of young and skilled workforce which can be a great contributor to India’s economic development.

2. India is a low-cost country

After the pandemic, China is no longer a low-cost country and therefore is not affordable for foreign Industries. The number of laborers are decreasing day by day and the labor wages now have become quite high compared to the other countries. China has growing middle class population.

The lowest-cost countries are now India, Mexico, and Vietnam. India is known for its low cost of living and cheap labor availability with great skill sets. Due to India’s population and low-cost advantages, many industries will tend to outsource their production and plants to India, which will indeed increase employment for the India’s workforce.

3. Strong relationships with other countries

India has a close and strategic relationship with major countries around the globe. Some of them are the United States of America (USA), the United Arab Emirates (UAE), Russia, France, Japan, and Germany.

All companies want to make high-quality products at low costs. American companies are preparing to set up an alternative to China by investing in India. Most Fortune 500 companies such as Apple, Coca-Cola, PepsiCo, Hewlett Packard, and other companies around the globe plan to move some portion of their manufacturing to India.

This gives India the opportunity to use its strategic relationships for the benefit of the country not only in terms of military or manufacturing but also in terms of trade, supply chain partners, and global development goals.

What should India focus on in the upcoming years?

Development, Education, and Infrastructure should walk hand in hand

India is a developing country. India is the fifth largest in the world according to GDP size, but there are many issues yet to be addressed such as illiteracy, unemployment, government schemes, the number of taxpayers, and many more.

Rising entrepreneurship and ease of doing business are improving its ranking which is a great news for any developing country like India. But at the same time, providing great educational facilities and Infrastructure is a necessity, because literacy is directly proportional to employment.

Having and providing more infrastructure will play an important role in the upcoming decades. Infrastructure includes space, technology, Internet, data, science, and research. India currently ranks 40^th in terms of technology worldwide. At the same time, India is known for providing the cheapest Internet, and medical facilities around the world. India’s FinTech revolution has been an eye-catcher for most of the developed countries.

Looking at the current growth and opportunities in India, many businessmen, companies, CEOs, famous personalities, and speakers around the world state that if India takes the right advantage of the opportunities in the upcoming years it is going to be India’s century to be one of the manufacturing leaders in the world.

“Fortunately for India, it has got a growing economy. If it is doing the right things with taxation and focusing on the right areas for human development, it is going to have no problem, over a period, taking care of its own needs.”

-Bill Gates